An Innovation Junkie

Business901 Podcast Transcription
Implementing Lean Marketing Systems

The Innovation Junkie
Guest was Saul Kaplan

Related Podcast:
An Innovation Junkie Interviewed

Copyright Business901


Saul Kaplan is the founder and chief catalyst
of the Business Innovation Factory (BIF), a
real-world laboratory for exploring and testing
new business models and social systems. BIF
has attracted a global community of over
5,000 innovators and organizes the
internationally renowned BIF Collaborative
Innovation Summit. Saul shares his
innovation musings on Twitter (@skap5) and
his blog (It’s Saul Connected), and as regular contributor to the
Harvard Business Review, Fortune, and Bloomberg Businessweek.

Business models don’t last as long as they used to. Historically
executives have managed a single business model over their
entire careers. Today companies must be
capable of designing, prototyping, and
experimenting with new business models.
Executives will have to launch two to three
new business models over their careers.
They are not prepared, and corporate
innovation efforts focus only on improving
performance of existing business models.

This book provides all executives with the
tools and survival skills to create a pipeline
of new business models in the face of disruptive markets and
competition. It will provide an actionable roadmap for executives
and workers at all levels to avoid being “netflixed” by doing R&D
for new business models.


Transcription of the Podcast

Joe Dager: Welcome everyone. This is Joe Dager, the host of
Business901 Podcast. With me today is Saul Kaplan. He is the
founder and chief catalyst of the Business Innovation Factory, a
real-world laboratory for exploring and testing business models
and social systems. Saul, I would like to start the conversation by
talking about your book and maybe what caused you to write it,
"The Business Model Innovation Factory."
Saul Kaplan: Well, Joe, first of all, thank you for having me. It's
great to be with you today. It's a joy to be out talking about the
book. It's a lot more fun than writing it. It's really been a labor of
love. I'm really just an innovation junkie. I believe there's always
a better way in arranging from small nuisance things to a very
large social system changes that I think we need here in the 21st
century.
"Business Model Innovation Factory" is a book that describes my
experience and the experience of an incredible team, here at BIF,
the Business Innovation Factory, the nonprofit that I founded. We
help people, organizations, and communities that want to go from
tweaks to transformations. We're good at tweaks.
We're good at making incremental changes and improving the
efficiency of the way things work today, and that's great, but it's
nowhere near enough of what I call "market making." Going from
share taking to market making, and that's what the book is really
about.
Joe: Can you expand on it and tell me what market making
means?

Saul: I'm a passionate market maker, and I differentiate it from
share taking. Most people and organizations focus on well-defined
markets and the competitive day to day struggle of taking one
more share point. That's an important activity and one that most

organizations focus on. But there's nowhere near enough capacity
for doing what I call "market making." Not competing for one
more share point in an existing market but actually creating new
markets. Or entirely new ways to create, deliver, and capture
value. I'm fascinated by the market makers out there, the
approach that you can take as an individual, as a leader, in an
organization, or as a leader in your community to creating new
markets or new approaches. I believe in the 21st century, that
our era screams for transformation, and we need to all get better
at what that means, and rolling up our sleeves and getting on
with it.
Joe: What differentiates this thought from the "Blue ocean"
strategy?
Saul: There are a lot of similarities actually in the "Blue ocean"
strategy. It's a very compelling approach. The approach that I
focus on is on business model innovation. Most know how to
improve the performance of a current business model, and there
are a ton of books, a ton of consultants and a ton of leaders out
there that can help advise us on ways to make incremental
improvements in our current business model. To me, a business
model is just a story of how any organization creates, delivers,
and captures value. What we're not good at is re-inventing our
business model, or experimenting with new business models. I
talk in the book about the example Blockbuster and Netflix. I
turned it into a verb and say our goal in the 21st century is to
avoid being "Netflixed," or to be disrupted by a leader or
organization that goes about the marketplace in a very, very
different way, leaving us blindsided, and like in the Blockbuster
story; they're completely befuddled in terms of the fact that
they're just stuck in their existing bricks and mortar business
model. They needed to figure out how to experiment with
different approaches and Netflix came along and completely
disrupted them.


Saul: No, that's a really important question. I don't think it's an,
either or. I think the challenge of leaders in the 21st century is
"and." We have to be able to scale and improve the efficiencies of
our current business models. That's where a lot of the continuous
improvement and L approaches have been very, very helpful.
Those are very important activities. But I think in a world where
you're vulnerable to being disrupted, you're going to have to do
those things, and in addition to that, you're going to need to
create platforms and tools that will enable you to experiment with
completely new business models. T is the hard part, even those
that might disrupt the current ones. T tools are very different
from the tools that we use when we're trying to improve the
efficiency of the way our organizations work today. You need to
do both.
I use the label of The Business Model Innovation Factory, or
creating a sandbox, where you're able to play with the design,
the prototyping, and testing of entirely new business models. I
think you have to do both. Most leaders know how to do the
efficiency piece -- to continue to pedal the bicycle of the way the
business works today. Very few know how to set up a Business
Model Innovation Factory or a sandbox for experimentation of
entirely new business models. That's what I focus on in the book.
Joe: Will this take a co-creation platform or co-producing
platform, is that where we are headed?
Saul: I think that's part of it. I think one of the principles that
any business model innovator shares this notion it's bigger than
any one of us. We need to learn to combine and re-combine
capabilities in completely new and different ways. I often say that
business model innovation doesn't require you to invent anything
new. Too many people conflate invention and innovation. I think
they're different. I'm thrilled that we celebrate a culture of
invention in this country, but to me, it's not an innovation until it
actually solves a problem in the real world, until it actually

delivers value. I define innovation as a better way to deliver
value. So it's really important to differentiate those two.

One of the tools that any innovator uses is what I call
"collaborative innovation," knowing that they don't have all the
capabilities necessary within the company, and oftentimes, we
need to look for capabilities outside of the organization. I is about
playing with the parts. It's about combining and re-combining
them to figure out new ways to solve a customer problem and
new ways to deliver value.

The problem a lot of organizations have is they think they're
stuck with just the parts that are within the four walls of the
company, and those parts are usually very, very busy trying to
deliver value the way the company currently operates, which is
why Blockbuster couldn't figure out how to experiment with the
Netflix business model. That's why Netflix is struggling today
even at risk of being Netflix themselves, because there's a new
set of technologies that enable us to get movies in an entirely
new and different way. They're trying to figure out what the right
business model is for them.
I think all leaders need to learn how to do R&D for new business
models while they're still pedaling the bicycle of the current one.
That's the leadership challenge of the 21st century.
Joe: It sounds very close similar to the Lean S and Alex
Osterwalder's "Business Model Generation." What makes your
thoughts different?
Saul: A lot of us that focus on business model innovation are all
actively trying to put these ideas into the marketplace and into
the hands of leaders. Alex is a good friend; "Business Model
Generation" is a fantastic book. I use the business model canvas
as a template in my book, "Business Model Innovation Factory."
This is the new strategic imperative, and there aren't enough of
us talking about and focusing on business model innovation as a

strategic weapon. Too many of us are focused on efficiencies and
improvement within the current business model, and we need to
open up this area of exploration, create a new set of tools, and
then help leaders -- companies, governments of non-profits and
for--profits -- figure out how they can do more ongoing
experimentation. I think we're just at the beginning of this wave,
and I'm glad that there are other voices out there, because it's
bigger than any one of us.
The principle you just mentioned is really important. It's about
our customers; it's about human behavior and the needs of the
customers whom we are trying to serve. The tool that we use to
ignite business model innovation is to try to change the
conversation from thinking about the world to lengths of your
current company or organization, which we are all wired to do,
and changing that conversation to think about it through the lens
or from the perspective of the end user or customer.
It's then and only then that we can start to understand and begin
to conceive out entirely new ways to deliver value. That is what
business model innovation is all about. That's how you get from
making tweaks to the current business model, which is about
making the current way you go to market more effective and
understanding the customer, what they value, what their current
experience is. Then designing ways to improve their experience,
or to solve the problems or jobs that they are trying to do, and to
conceive new approaches to do that are not constrained by the
current business model. Because if you don't think through those
alternative models, even the ones that might disrupt the way you
work today, someone else will and then the 21st century the half-
life of of these business models is declining.
So you are very vulnerable to being Netflixed, or being disrupted,
if you don't figure out how to move more quickly from new
business model ideas that live on a white board, and getting them
into the real world where we can explore and test them.

Joe: I look at business model innovation; I think about it, for a
standard company, is it really realistic to be changing from
building business model after business model?
Saul: We need to try more stuff, so I think we need to do more
rapid cycles, from ideas to prototypes to testing them in the real
world. So no, we are not going to scale them all, but we can test
them, we can find the conditions in the real world that will allow
us to explore new business models, and we can do it cheaply, and
we can do it quickly. I love watching the way the millennial
generation is experimenting with business models, particularly
digital ones. We are dinosaurs; we spend months and months
and months analyzing and thinking about it and having team
meetings before we even get comfortable building some type of
prototype of something, particularly new business models that
are enabled online. Millennials are back 24 hours later and they
have got a mock-up of a website, with a transaction engine
attached to it, and they are actually experimenting with whether
the business model works or not, while we are still sitting around
in conference rooms and meetings.
We are going to have to get much better at experimenting all the
time, learning how to fail faster with ideas that don't make sense
and can't scale and learning how to harvest those that do.
Joe: Can a mature company afford to take that risk, with their
brand to do that type of experimentation out there and be
transparent with the customer?
Saul: I would put a counter argument out. Can a mature
company afford not to? How many "mature companies" are
incredibly vulnerable to being Netflixed to having somebody new
come into their space that does not compete in the traditional
industry the way they define it, that is not interested in taking a
share of point away from them, but is interested in completely
redefining the market and how value is delivered to a customer.


If you are a leader, and you are watching this activity go on
today, and you don't have the capacity to understand it, to do
some experimentation of the various models might work, you are
going to be disrupted.
I tell the story in the book, about Sony Corporation. Here is a
company that is in a world of hurt right now. They watched the
entire music business get swept away from them by Steve Jobs
and Apple. Should that really have happened to Sony? Think
about it, they had a huge division that was in the music business,
had under contract some of the world's greatest star performing
artists, and had another huge division that made the coolest
products and new technologies. It even brought us the Walkman
for heaven's sake. I am old enough to have had one.
Everybody had one. What happened to Sony? They had all the
parts, all the capability that they needed to change the way music
was enjoyed, and delivered to consumers. But they were so stuck
in their current business model, and the political infighting
between the divisions, that they couldn't do experiments that
recombined the parts to do what Steve Jobs ultimately did.
Companies the size of Sony, they want to stay competitive, are
going to have to create the platforms and the sandboxes to do
that experimentation, and put resources in there to be able to
play with new business models, because if they don't, someone is
going to come along like Apple did, and take them down. This is
not going to be the exception in the 21st century; this is going to
be the rule.

How do you do that is what I outlined in the book. We don't have
all the answers, but we have a lot of experience, tell and share a
lot of stories about how you go from tweaks to transformation,
and we are beginning a conversation with like-minded innovation
junkies, to be able to explore those ideas and put them into
practice.


Joe: How do you or BIF work with people?

Saul: BIF is a nonprofit, with a mission, to enable a
transformation, business models and our complex social systems,
little things like education, healthcare, energy and
entrepreneurship. These are all systems level challenges, and the
only way we are going to make progress in my view is if we learn
to experiment with new systems level solutions. BIF has been
building a community of innovation junkies. They come from
every industry, from every part of our society, and they have
been connecting to each other and to our platform for the last
eight years. We hold a very, very cool collaborative summit,
which is a celebration of the work that we do every year.
This year, it's September 19th and 20th, here in Providence,
Rhode Island. About 400, like--minded innovation junkies will
come to Providence for two days of total immersion in some of
the most compelling and inspiring stories of transformation that
you have ever heard. It's the most inspiring two days. I look
forward to it every year. We end up filling a very cool theater,
and it's just a remarkable couple of days, so anybody listening
should check out BIF-8, this is our 8th year of doing it. You could
find the information about it on our website
businessinovationfactory.com.
We hold events like that. We have a series of labs; we call them
experience labs, where we do our project work. Our projects are
all sponsored projects by organizations within our community that
want to go up this learning curve, business model innovation and
systems level change, and we learn every day, and we share
what we learn back with the organizations that sponsor our work,
and participate in our community. It is a very exiting community
that is; I think, working to co-create our future and helping us all
go up that steep learning curve.


Joe: It sounds very interesting. What would you tell a small
business guy? This sounds good for the startup guy to be able to
do this because I got a blank slate to deal with. I can just start
doing this; a bigger company can allocate resources to be able to
do it. We get to a smaller company or a mid-sized company, and
there are not that many resources to go around. I know I have to
commit to it, but how would I organize something like this within
a small company?
Saul: Small companies obviously have the advantage, because
they are not as entrenched in a single business model. In fact, we
learn a lot from entrepreneurs. One of our labs is called the
Entrepreneur Experience Lab. It's a partnership with Babson
College, one of the best entrepreneurial education centers in the
world. What we learn from talking with entrepreneurs all over the
country, and all over the world, is exactly what we have been
talking about. No entrepreneur ever gets it right on the first try.
If you talk to most entrepreneurs, it takes three, four, five
attempts to get to the right business model. Business plans are
just put together because that's what investors want to see, but
they're no semblance to the way that the business model evolves
in the real world.
So we can learn a lot about business model innovation from
entrepreneurs. Now, the trick, of course, is, once you land on a
business model that works and has the promise to scale, then
you've got to be able to do both things. You've got to be able to
scale that business model and at the same time you're going to
have to be thinking about potential new ones because the
business model isn't going to last as long as they used to, and
that's the trick -- the balancing act between scaling and making
the current business model efficient and contemplating,
experimenting and testing with new ones.

Joe: How would I keep that alive? I'm sitting here scaling their
company, but I want to keep that innovation alive. Do I have to,

let's say turn that over or do I hire someone to scale it like a
Sculley? That may be the wrong example. And leave me to
innovate on the side? How do you do something like that?
Saul: If we stay focused on business model innovation, right?
There's a whole other part of the innovation continuum which is
about how I innovate within the current business model. How do I
add new products, new services? How do I improve the
capabilities? That's where a lot of the work that you, and your
network folks has done Lean and other tools. It really is useful.
They're important so I don't want to dismiss those. But for the
sake of this conversation, talking about transformational business
model change, I think you have to create a sandbox.
I often talk about it as a connected adjacency. I think the
sandbox has to have enough autonomy to be able to wrap its
cycle and test new business models. It has to have the resources.
It requires senior management to run interference and to handle
potential conflicts. Because the minute that team wants to
explore anything that even smells like it might be disruptive, all
the line managers in the core model are going to resist it, some
subtly and some not so subtly. So it requires some strong
leadership from the top.
It also needs to be connected to the core business model. It
needs to be able to borrow capabilities, rather than reinvent them
so that it can do its business model experiments. It should be a
way to move people in and across the platform. People should be
free to dip their toe in the water of the innovation platforms. It
shouldn't be an isolated unit.
I think people should move back and forth, as they are moving up
the career ladder, to work alternatively on ways to scale the
existing business model and to be thinking about and
experimenting with the next one.


We should move people back and forth so it doesn't become a
deep silo with big walls between it that we can't move capabilities
and ideas fluidly back and forth.
Of course, this is easier for me to say than it is to do and that's
why I wrote the book. To begin to put that down on paper and to
begin to have the conversation with leaders about, what does it
really take to create a Business Model Innovation Factory and
how do I balance both of those important activities?
Joe: I think you really hit the nail on the head. Because when
you look at Apple, for example, you have the iPod and the iTunes
but the iPhone still was connected to the iPod, a lot of similarities,
and a lot of overlapping features. Then when you go to the iPad,
it's the same thing. There are a lot of overlapping features, a lot
of things that are all connected. The interesting thing about Apple
is that you can lay all of their products, practically, on one table.
Saul: Yeah. The story I love to tell, and I told in the book is how
they created the Apple Store which completely changed the
customer experience. It's a great story. If you read the Steve
Jobs book by Eisenberg, he talks about it there, as well.
Imagine this. Imagine the day that Steve Jobs came in and said
to the entire team that, "We're going to create an Apple Store
and sell directly to our end customer." Now, at the time, their
business model was to sell all of their products through value
added resellers, like Sears and CompUSA.
Imagine all the layers of management, all the incentives, and
everything lined up to maximize the leverage of those channels,
all the customer relationships.

So, Steve Jobs comes in and says, "We're going to create and
open an Apple Store." Now, imagine what all of those line
managers thought and said.


But Steve Jobs knew how to balance both of those activities. "You
keep doing what you're doing now, to deliver the near term
operating objectives of the business. We're going to come over
here, and we're going to completely redesign the customer
experience."
He literally built a store. He built a store and the way that
Eisenberg tells it; he lived there for a year, literally lived there.
He totally immersed in all the details of that customer experience.
They got very close to wanting to open the first store and one
night, Steve Jobs in the middle of the night says, we're doing it
all wrong. We've organized it around our product groupings,
which is what most of the companies do because they see the
world through the lens of their current business model.
But he said that's not how customers use our products and
technology. We should completely redesign this store and the
customer experience for the way customer's value and think
about these technologies.
He literally went in there and they completely re-did it. I think
they might have had 60 days left before the opening. They just
completely re-did everything from the previous year, made their
deadline, opened the store, and of course, now we all know how
important the Apple Store is and that's where we go to see and
touch and feel the products. Then they were online to buy them.
They completely changed their business model. They reinvented
it while they were pedaling the bicycle of the old one. Then when
the time was right, they moved to the new one that completely
changed the way we think about and buy Apple products.

It's a great example of creating a Business Model Innovation
Factory that knows how to do both of those things. We can all
learn from that.


Joe: I find a lot of humor in what you said there when I think of
the remarkable channels that they were going through before,
the CompUSA and Sears.
Saul: No, but think about it. You can take almost any mature
business, right? I mean, you can think about any mature
business; it has a very well--honed way to go to market. The way
it creates, delivers, and captures value. That's a good thing and
there's nothing wrong with that. Now, we do a lot of things to
improve the efficiency of that. But none of that is going to
prevent that mature business from being disrupted by someone
who comes at it from a completely different way. We have to
learn how to disrupt ourselves, rather than waiting for someone
or another organization to disrupt us.
I think this is true for us as individuals. I think it's true certainly
for organizations, and I think it's also true for our communities.
We're not going to have the 21st century that we all want until
we learn how to be more experimental and how to carve out the
conditions in the real world to try more stuff.
Joe: Well, it sounds great. Steve Jobs can pull this off. Saul
Kaplan can pull this off. But can Joe Dager, this normal guy with
his normal company, pull something like this off?
Saul: Even putting my name in the same sentence with Steve
Jobs, I think I'm a lot closer to you Joe than to Steve. I'm a
dinosaur; I've had to scratch and claw my way up that learning
curve. I think it starts with recognizing that the way things have
worked is not the way that things are going to work going
forward. It starts with being more than just a little worried about
being disrupted or being displaced as an individual or as a
company. Then it starts by being willing to learn and to explore
and connecting with others that are.


I think the imperative for all of us is to get better faster. We have
to take advantage of every day where we can learn a new set of
skills and gain a new experience if we want to stay relevant.
I don't think there is any magic bullet here. I think that there's
just recognition that we need to get better faster and then
beginning to put ourselves into places and connecting with people
and events that can help us do that.
Joe: Is there anything that you would like to add that maybe I
didn't ask you? A parting thought here.
Saul: First of all, it's a great conversation, and I enjoyed the
questionings. I really appreciate the opportunity to share some of
these thoughts. Obviously, I'd like a lot of people to read the
"Business Model Innovation Factory" and share their thoughts and
ideas with me. If you're interested please check out the Business
Innovation Factory, BIF. Take a look at what we're doing.
There's lot of different ways to connect with us, including the
BIF-8, the summit that I talked about earlier in the conversation.
I just look forward to continuing the conversation and connecting
with logs of new, like minded innovation junkies so that we can
get on with co-creating a better future.
For the book, if you want to check that out, it is bmifbook.com.
There you can download the introduction to the book and learn a
bit more about it. You can see where I am talking about the book.
The website for BIF is businessinnovationfactory.com.
Joe: I'd like to thank you very much. This Podcast will be
available in the Business901 blog site and also the Business 901
iTunes site. Thanks again.
Saul: Joe, thanks so much for taking the time. I appreciate it.
Good conversation.



Joseph T. Dager
Lean Marketing Systems
Ph: 260-438-0411 Fax: 260-818-2022
Email: jtdager@business901.com
Web/Blog: http://www.business901.com
Twitter: @business901
What others say: In the past 20 years, Joe and I
have collaborated on many difficult issues. Joe's
ability to combine his expertise with "out of the
box" thinking is unsurpassed. He has always
delivered quickly, cost effectively and with
ingenuity. A brilliant mind that is always a pleasure to work with." James R.

Joe Dager is President of Business901, a progressive company providing
direction in areas such as Lean Marketing, Product Marketing, Product
Launches and Re-Launches. As a Lean Six Sigma Black Belt,
Business901 provides and implements marketing, project and performance
planning methodologies in small businesses. The simplicity of a single
flexible model will create clarity for your staff and as a result better
execution. My goal is to allow you spend your time on the need versus the
plan.

An example of how we may work: Business901 could start with a
consulting style utilizing an individual from your organization or a virtual
assistance that is well versed in our principles. We have capabilities to
plug virtually any marketing function into your process immediately. As
proficiencies develop, Business901 moves into a coach’s role supporting the
process as needed. The goal of implementing a system is that the processes
will become a habit and not an event.

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